California’s Santa Clara County, which includes the majority of Silicon Valley, is home to many of the largest and most successful tech companies in the world. It is also home to one of the largest homeless populations in the country. On any given night, more than 6,500 county residents are homeless. More than 2,200 have been homeless for several years and often suffer from serious mental illness, chronic physical health issues, or other disabling conditions. These chronically homeless individuals use a disproportionate amount of expensive, publicly funded services and facilities such as emergency medical care and mental health care. In fact, for at least 10 percent of these homeless individuals, the county spends more on these costs each year than it would providing the same group with housing and supportive services, which include preventive health care, counseling, and other services they need to lead stable lives. If we can effectively identify and house these high-need, high-cost individuals, we can both substantially improve their quality of life and more effectively and efficiently use taxpayer dollars.

This observation is what led the county last year to launch Project Welcome Home, an initiative designed to provide community-based clinical services and permanent supportive housing for 150 to 200 chronically homeless individuals who are among the most frequent users of the county’s emergency rooms, acute mental health facilities, and jail system. To ensure both successful results and accountable spending of public dollars, the county is using a “pay-for-success” approach to contracting these services over a six-year period. It has entered into an agreement to pay the service provider, the San Francisco Bay Area-based nonprofit Abode Services, if and only if it successfully provides stable housing for these individuals. Payments are delivered on a rolling basis in proportion to the amount of time each individual continuously spends housed. Investors and grantmakers have contributed $6.9 million in upfront funding for the project; the county will pay out a maximum of $8 million for successful outcomes. We will soon be launching a similar initiative to better serve the most severely mentally-ill individuals in the county, who currently use substantial amounts of costly emergency and inpatient mental health services.

The county has had to make substantial investments in the human and technical infrastructure necessary to make these initiatives successful. This has involved coordinating each project; hiring a technical assistance provider; completing the multi-year process of defining desired outcomes, procuring a service provider, and negotiating performance metrics; identifying and contracting with university researchers to conduct a rigorous evaluation of the program; and obtaining any necessary outside financing. Creating the legal agreements and building the technical infrastructure to gather the data necessary to enroll clients and evaluate outcomes has required key county leaders to invest huge amounts of time and energy in a project that will only serve 150 to 200 county residents.

What has made this effort worthwhile is the groundwork it has laid for broader systems change—positive results beyond the program-specific ones that the county has agreed to pay for.

In order to identify the highest-cost, highest-need homeless individuals in the county who could be enrolled in Project Welcome Home, we had to create the capacity to pull data from our health care system, our homeless shelters, and our criminal justice system, match individuals’ records across systems, and then run that data against an algorithm that would identify the people eligible for the program. We had to build similar capacity to collect data on individuals to evaluate the program, determine whether the successful outcomes we defined are being achieved, and assess whether the project is successful in achieving other improvements in the health and wellbeing of the individuals served. Now that we have made the initial investments needed to build this capacity, we can more easily create this sort of infrastructure for other initiatives serving high-need populations. The rigorous six-year study of Project Welcome Home will provide the county with an array of insights into whether and to what extent these services have been effective, and can be the basis for policy decisions both here and across the country.

We hope that the substantial time and energy we have invested in defining program outcomes and creating performance-based contracts for our first two pay-for-success initiatives also will be the beginning of a shift toward more outcomes-focused contracting for county-funded services in general. Santa Clara County spends $1 billion on services delivered by community-based organizations each year. In pushing us to better define our objectives in serving vulnerable populations and creating incentives to better achieve these objectives, these initial pay-for-success schemes have the potential to help us better understand how to substantially increase these services’ impact.

Moreover, our pay-for-success projects have led to greater collaboration between the county and key community stakeholders, including our service providers, academic institutions, the technology sector, and the philanthropic sector. Bringing these stakeholders together to grapple with complex questions around what it means to effectively address issues like homelessness and severe mental illness has deepened each stakeholder’s understanding of the challenges faced by the others, and has led to improvements in an array of areas such as data sharing, performance measurement, client enrollment and tracking, and project financing.

A year and a half into Project Welcome Home, the program is meeting its success metric. The county is paying directly and exclusively for our pre-defined postive outcomes for chronically homeless individuals. But perhaps just as importantly, we are also benefitting from having laid the foundations for more projects of this type, meaning we can launch our next such project more efficiently and economically, and further improve our ability to define the outcomes we can and must deliver to the communities we serve.

Greta Hansen is the chief assistant county counsel for Santa Clara County and the county’s primary legal advisor on its two multi-million-dollar pay-for-success initiatives.

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